Date of Award
2025
Degree Name
Business Administration
College
College of Business
Type of Degree
D.B.A.
Document Type
Dissertation
First Advisor
Dr. Timothy Bryan
Second Advisor
Dr. Charles Stivason
Third Advisor
Dr. Mark McKnight
Abstract
This study examines how persistent Type I errors in going concern opinions impact investors’ decisions and confidence in the warning signal embedded in the opinion. Despite regulatory changes intended to improve audit accuracy and restore investors’ confidence in the audit profession, such as the Sarbanes-Oxley Act and the Accounting Standard Update 14-15, along with the StoneRidge Investment Partners vs. Scientific Atlanta Court Case verdict, persistent going concern opinions (Type I errors) weaken the perceived informativeness of audit warnings. Signaling theory provides the framework to explore the question: “Do persistent Type I errors in going concern opinions influence investors’ perceptions of the going concern opinion, ultimately having a diminishing impact with each additional persistent receipt?”. Archival data from 2000 to 2021 for U.S. publicly traded companies is analyzed, measuring persistent Type I errors and cumulative abnormal returns. Findings suggest investors initially react to the going concern opinion, evidenced by negative abnormal returns, but lose confidence in the opinion with each additional receipt. Results raise concerns about audit quality and why auditors continue to issue going concern opinions despite the high Type I error rates. This study responds to Christensen et al.’s (2016) call for research to help enhance understanding on how audit opinion errors, particularly Type I errors, influence investor perceptions. Insight gained contributes to the understanding of how persistent Type I errors in going concern opinions influence investment allocations and provides valuable information to auditors, investors, and regulators, which can help improve auditing processes.
Subject(s)
Industrial management.
Accounting.
Auditing.
Recommended Citation
Kooti, Christin, "Persistence is not key: a study on the relationship between the persistence of going concern opinion Type I errors and investor confidence" (2025). Theses, Dissertations and Capstones. 1912.
https://mds.marshall.edu/etd/1912
